• LoveLEHGirl Is Watching
    Posted by on January 30th, 2007 at 1:24 pm

    The Wall Street Journal profiles Yolanda Holtzee, an “Internet investigator in sweatpants.”

    Wall Street is full of corporate gadflies, many of whom agitate for corporate-governance reform or focus on arcane bylaw changes. Ms. Holtzee, a self-styled Internet investigator in sweatpants, focuses on exposing out-of-bounds behavior and catching bad guys. And after pointing regulators in the right direction more than once, Ms. Holtzee has achieved two things every gadfly craves: attention from those she targets — and action.
    “I think people take her seriously because she has good instincts and actually produces cases,” says former senior SEC official Ari Gabinet, now an executive at Vanguard Group Inc., the fund management giant. “If I could have hired her, we would have had an endless stream of cases.”

  • The Biomet CD?
    Posted by on January 30th, 2007 at 11:18 am

    First let me state clearly that I’m not recommending this as a fixed-income investment, but let’s consider what the market is saying about Biomet (BMET).
    Assuming all goes smoothly, the company is to be bought by a private equity consortium in nine months at $44 a share. Yesterday’s close was $41.90 a share. That translates to a gain of 5.01% over the next nine months. That’s not a bad return. Think of it in Dow terms—it would be like bringing the index to over 13100.
    On an annualized basis, the Biomet investment is about 6.7% which beats almost any CD you can find. On top of that, the stock could pay another annual dividend this summer. Last year’s was for 30 cents a share, which is another 0.7% return. I don’t see why they’ll cut out the dividend this year.
    Of course, the stock isn’t exactly like a bond. The deal still needs to be approved by shareholders and regulators (incidentally, I oppose the deal). But the stock is starting to behave like a fixed-income investment.
    If I were a CFO and I needed to park some cash for the next nine months, picking up shares of Biomet could be a shrewd low-risk investment.

  • Davos Is for Wimps
    Posted by on January 30th, 2007 at 8:57 am

    Michael Lewis nails the professional worriers who gather every year in Davos:

    Davos is where people with no talent for risk-taking gather to imagine what actual risk-takers might do. Davos Man needs to sit in judgment; Davos Man needs to brood. So great is this need that he will brood about virtually anything, no matter how little he knows about it.

    It’s only January, but I’m ready to name that, the Paragraph of the Year.
    He’s exactly right. When analyzing the market or the economy, it’s easy to fall into the “over-worrying trap.” I’m often surprised by how many otherwise intelligent people can fall into this trap and wind up saying silly things. I mean, there’s always something to worry about.
    The professional worriers remind me of the Major General in HMS Pinafore who knows many “cheerful facts about the square of the hypotenuse.” They know the facts, but they can’t see them in proper context.
    The free market is a highly complex system. It simply has a way of working things out. Naturally there are crises which always seem to be “looming,” but people are surprisingly good about mastering them.
    A few years before Y2K, I remember reading a story about a power plant that ran a drill to prepare for the new millennium. The plant failed and everything went to pieces. So a quick-thinking engineer jumped in and reset all the plant’s clocks to 1972, which had the same day and date alignment of 2000 (28 years is seven days of the week times four years in a leap cycle). Presto. The plant was up and running and they had time to fix the bugs.
    But in the minds of the professional worriers, that scenario could never happen. They think if some problem comes along, people will never adapt. They assume market participants will run head-first into a brick wall, then pick themselves up, and do it again.
    Lewis writes:

    Thailand installs capital controls and the markets force it to reverse its policy, virtually overnight — again with nary a ripple. The Brazilian real is now less volatile than the Swiss franc; Botswana’s debt is now more highly rated than Italy’s. Oil prices double, the U.S. housing market tanks — no matter what happens, financial markets adjust quickly and without hysteria.
    There are obviously a few things to worry about just now in the world, but the inability of traders to find a sensible price for the spread between European junk and European Treasuries isn’t one of them.

    That problem will also be solved. And the answer won’t come from Davos.

  • Graco 4Q Profit Rises 10 Percent
    Posted by on January 30th, 2007 at 8:44 am

    From the AP:

    Graco Inc. (GGG), which makes pressure washers and pumps for industrial uses, on Monday said fourth-quarter profit increased 10 percent as growth in its industrial and lubrication equipment segments offset slightly lower sales of contractor products.
    Net income grew to $35.6 million, or 52 cents per share, from $32.3 million, or 46 cents per share, a year earlier.
    Sales expanded 10 percent to $203.4 million from $185.6 million.
    By segment, fourth-quarter contractor equipment sales fell 2 percent to $71 million. While the segment’s sales in Europe and Asia rose, sales in the Americas fell, reflecting a weak U.S. housing market. Sales of industrial equipment rose 14 percent at the same time to $110.6 million. Lubrication equipment sales jumped 40 percent to $21.8 million.
    Analysts polled by Thomson Financial forecast earnings of 52 cents per share and sales of $205.8 million.
    Graco said that a weaker U.S. dollar in 2006 compared with 2005 boosted sales and earnings.
    For the full year, net income increased to $149.8 million, or $2.17 per share, from $125.9 million, or $1.80 per share. Sales rose to $816.5 million from $731.7 million a year earlier.

  • The Money Honey Brand
    Posted by on January 29th, 2007 at 4:18 pm

    Bloomberg looks at the fallout of Todd Thomson’s dismissal at Citigroup (C). Journalism professors are criticizing the relationship Thomson had with Maria Bartiromo. Last year, she traveled with him to Asia on a company jet. He also approved $5 million for a show she was to co-host.
    The article includes this nugget:

    On Jan. 16, Bartiromo sought to trademark her “money honey” moniker for use on children’s television shows, games, T-shirts, dishes and bookbags, according to the U.S. Patent and Trademark Office’s Web site.

    Bookbags?
    The New York Post, naturally, has more.

  • Milton Friedman Day
    Posted by on January 29th, 2007 at 12:35 pm

    Today is Milton Friedman Day. The economist died two months ago at the age of 94. Tonight, PBS (note irony) will premiere “The Power of Choice: The Life and Ideas of Milton Friedman.” Check your local listings.

  • Nicholas Financial’s Earnings
    Posted by on January 29th, 2007 at 12:29 pm

    Our smallest stock on the Buy List, Nicholas Financial (NICK), reported earnings of 27 cents a share:

    Nicholas Financial, Inc. announced that net income increased 2% to $2,770,000 for the three months ended December 31, 2006 as compared to $2,718,000 for the three months ended December 31, 2005. Diluted earnings per share increased 4% to $0.27 for the three months ended December 31, 2006 as compared to $0.26 for the three months ended December 31, 2005. Revenue increased 6% to $11,730,000 for the three months ended December 31, 2006 as compared to $11,107,000 for the three months ended December 31, 2005. The Company has reported record same quarter increases in revenues and earnings for 66 out of the past 67 quarters.
    Net income increased 12% to $8,568,000 for the nine months ended December 31, 2006 as compared to $7,621,000 for the nine months ended December 31, 2005. Diluted earnings per share increased 14% to $0.83 for the nine months ended December 31, 2006 as compared to $0.73 for the nine months ended December 31, 2005. Revenue increased 14% to $34,666,000 for the nine months ended December 31, 2006 as compared to $30,506,000 for the nine months ended December 31, 2005.

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  • Sysco Earns 38 Cents a Share
    Posted by on January 29th, 2007 at 9:58 am

    That’s in line with estimates:

    Food-services provider Sysco Corp. said Monday fiscal second-quarter net income grew 16 percent, helped by business reviews of customers.
    Quarterly earnings totaled $236.7 million, or 38 cents per share, from $204.2 million, or 33 cents per share during the same period last year.
    Revenue grew 8 percent to $8.57 billion, from $7.97 billion last year.
    Analysts polled by Thomson Financial expected net income of 38 cents per share on revenue of $8.6 billion.
    Sysco said it conducted 10,000 business reviews at its U.S. broadline operations during the quarter, and sales to customers who participated in the business-review process were “solid.”

  • P/E Ratios by Sector
    Posted by on January 26th, 2007 at 6:09 am

    Here’s a look at the P/E Ratios of the ten sectors of the S&P 500:
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    The P/E ratio of the overall S&P 500 is about 16.2. This is slightly distorted due to the low P/E ratio of the energy sector (9.6% of the index).
    Since energy stocks have been generating very healthy profits, and the market doesn’t believe the good times will last, or least, not at this pace, that gives them a low P/E ratio. That’s pretty common for cyclical stocks. Ignoring energy, I see that five sectors have P/E ratios greater than 18.7.
    Here’s a look at each sector’s Relative P/E Ratio, which is their P/E compared with the overall S&P 500.
    image403.png
    Although Relative P/E’s are far from perfect, they’re a good measures of value. You can see that only the cyclical sectors like energy and industrials show any noticeable downtrend. Even though tech stocks haven’t done very well, by this metric, it doesn’t appear that tech has become any less expensive.

  • Today’s Investing Lesson: Diversify
    Posted by on January 25th, 2007 at 4:50 pm

    The S&P 500 had a big up day yesterday, and a big down day today. It’s almost back where it started, yet our Buy List managed to beat the index on both days.
    What’s particularly impressive is that we were able to stay ahead of the market today even though shares of Varian Medical Systems (VAR) got a super atomic wedgie. The stock dropped 8.6% today. The 11.4% jump in Respironics (RESP) helped ease the pain.
    Too many investors never give a thought about diversifying across industries. Or they think diversity means owning several tech stocks. You can own only a few stocks and track the market very closely. Also, you can own hundreds of stocks and have a very low correlation to the rest of the market.